Welfare Effects of Tariff Reduction Formulas
WTO negotiations rely on tariff reduction formulas. It has been argued that formula approaches are of increasing importance in trade talks, because of the large number of countries involved, the wider dispersion in initial tariffs (e.g. tariff peaks) and gaps between bound and applied tariff rates. This paper resents a two country intra-industry trade model with heterogeneous firms subject to high and low tariffs. We examine the welfare effects of applying three different tariff reduction formulas proposed in the literature i) a proportional cut, ii) the Swiss formula and iii) a compression formula. No single formula dominates for all conditions. The ranking of the three tools depends on the degree of product differentiation in the industry, and the achieved reduction in the average tariff.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Joseph Francois & Will Martin, 2003.
"Formula Approaches for Market Access Negotiations,"
The World Economy,
Wiley Blackwell, vol. 26(1), pages 1-28, January.
- Francois, Joseph & Martin, Will, 2003. "Formula Approaches for Market Access Negotiations," CEPR Discussion Papers 3720, C.E.P.R. Discussion Papers.
- Joseph Francois & Will Martin, 2002. "Formula Approaches for Market Access Negotiations," Tinbergen Institute Discussion Papers 02-125/2, Tinbergen Institute.
- Daniel Gros, 1987. "Protectionism in a Framework with Intra-Industry Trade: Tariffs, Quotas, Retaliation, and Welfare Losses (Le protectionnisme dans un cadre faisant intervenir les Ã©changes de produits analogues: droit," IMF Staff Papers, Palgrave Macmillan, vol. 34(1), pages 86-114, March.
- Lockwood, B. & Wong, K.Y., 1996.
"Specific and Ad Valorem Tariffs Are Not Equivalent in Trade Wars,"
9602, Exeter University, Department of Economics.
- Lockwood, Ben & Wong, Kar-yiu, 2000. "Specific and ad valorem tariffs are not equivalent in trade wars," Journal of International Economics, Elsevier, vol. 52(1), pages 183-195, October.
- Kar-yiu Wong & Ben Lockwood, 1997. "Specific and Ad Valorem Tariffs are not Equivalent in Trade Wars," Working Papers 0081, University of Washington, Department of Economics.
- Kar-yiu Wong & Ben Lockwood, 1997. "Specific and Ad Valorem Tariffs are not Equivalent in Trade Wars," Discussion Papers in Economics at the University of Washington 0081, Department of Economics at the University of Washington.
- Jan Jørgensen & Philipp Schröder, 2005. "Welfare-ranking ad valorem and specific tariffs under monopolistic competition," Canadian Journal of Economics, Canadian Economics Association, vol. 38(1), pages 228-241, February.
- Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
- Schmitt, Nicolas & Yu, Zhihao, 2001. "Economies of scale and the volume of intra-industry trade," Economics Letters, Elsevier, vol. 74(1), pages 127-132, December.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpit:0506006. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA)
If references are entirely missing, you can add them using this form.